Impacts of compressed air energy storage plant on an electricity market with a large renewable energy portfolio

Renewable energy generation is expected to continue to increase globally due to renewable energy targets and obligations to reduce greenhouse gas emissions. Some renewable energy sources are variable power sources, for example wind, wave and solar. Energy storage technologies can manage the issues associated with variable renewable generation and align non-dispatchable renewable energy generation with load demands. Energy storage technologies can play different roles in each of the step of the electric power supply chain. Moreover, large scale energy storage systems can act as renewable energy integrators by smoothing the variability. Compressed air energy storage is one such technology. This paper examines the impacts of a compressed air energy storage facility in a pool based wholesale electricity market in a power system with a large renewable energy portfolio.

The operating schedule for battery energy storage companies in electricity market

This paper presents a series of operating schedules for Battery Energy Storage Companies (BESC) to provide peak shaving and spinning reserve services in the electricity markets under increasing wind penetration. As individual market participants, BESC can bid in ancillary services markets in an Independent System Operator (ISO) and contribute towards frequency and voltage support in the grid. Recent development in batteries technologies and availability of the day-ahead spot market prices would make BESC economically feasible. Profit maximization of BESC is achieved by determining the optimum capacity of Energy Storage Systems (ESS) required for meeting spinning reserve requirements as well as peak shaving. Historic spot market prices and frequency deviations from Australia Energy Market Operator (AEMO) are used for numerical simulations and the economic benefits of BESC is considered reflecting various aspects in Australia’s National Electricity Markets (NEM).

Estimating benefits of energy storage for aggregate storage applications in electricity distribution networks in Queensland

Electric Energy Storage (EES) is considered as one of the promising options for reducing the need for costly upgrades in distribution networks in Queensland (QLD). However, It is expected, the full potential for storage for distribution upgrade deferral cannot be fully realized due to high cost of EES. On the other hand, EES used for distribution deferral application can support a variety of complementary storage applications such as energy price arbitrage, time of use (TOU) energy cost reduction, wholesale electricity market ancillary services, and transmission upgrade deferral. Aggregation of benefits of these complementary storage applications would have the potential for increasing the amount of EES that may be financially attractive to defer distribution network augmentation in QLD. In this context, this paper analyzes distribution upgrade deferral, energy price arbitrage, TOU energy cost reduction, and integrated solar PV-storage benefits of EES devices in QLD.

A study of the 10% electric vehicles target of the single electricity market

In late 2008, the Government of the Republic of Ireland set a specific target that 10% of all vehicles in its transport fleet be powered by electricity by 2020 in order to meet European Union renewable energy targets and greenhouse gas emissions reduction targets. International there are similar targets. This is a considerable challenge as in 2009, transport accounted for 29% of non-emissions trading scheme greenhouse gas emissions, 32% of energy-related greenhouse gas emissions, 21% of total greenhouse gas emissions and approximately 50% of energy-related non-emission trading scheme greenhouse gas emissions. In this paper the impacts of 10% electric vehicle charging on the single wholesale electricity market for the Republic of Ireland and Northern Ireland is examined. The energy consumed and the total carbon dioxide emissions generated under different charging scenarios is quantified and the results of the charging scenarios are compared to identify the best implementation strategy.

An Analysis of the Effect of Electric Vehicle Charging on the Operation of the Single Electricity Market

To meet European Union renewable energy and greenhouse gas emissions reduction targets the Irish government set a target in 2008 that 10% of all vehicles in the transport fleet be powered by electricity by 2020. Similar electric vehicle targets have been introduced in other countries. However, reducing energy consumption and decreasing greenhouse gas emissions in transport is a considerable challenge due to heavy reliance on fossil fuels. In fact, transport in the Republic of Ireland in 2009 accounted for 29% of non-emissions trading scheme greenhouse gas emissions, 32% of energy-related greenhouse gas emissions, 21% of total greenhouse gas emissions and approximately 50% of energy-related non-emission trading scheme greenhouse gas emissions. In this paper the effect of electric vehicle charging on the operation of the single wholesale electricity market for the Republic of Ireland and Northern Ireland is analysed. The energy consumed, greenhouse gas emissions generated and changes to the wholesale price of electricity under peak and off-peak charging scenarios are quantified and discussed. Results from the study show that off-peak charging is more beneficial than peak charging.

Impacts of Electric Vehicle charging under electricity market operations

The Irish government set a target in 2008 that 10% of all vehicles in the transport fleet be powered by electricity by 2020. Similar electric vehicle targets have been introduced in other countries. In this study the effects of 213,561 electric vehicles on the operation of the single wholesale electricity market for the Republic of Ireland and Northern Ireland is investigated. A model of Ireland’s electricity market in 2020 is developed using the power systems market model called PLEXOS for power systems. The amount of CO2 emissions associated with charging the EVs and the impacts with respect to Ireland’s target for renewable energy in transport is also quantified. A single generation portfolio and two different charging scenarios, arising from a peak and off-peak charging profile are considered. Results from the study confirm that offpeak charging is more beneficial than peak charging and that charging EVs will contribute 1.45% energy supply to the 10% renewable energy in transport target. The net CO2 reductions are 147 and 210 kt CO2 respectively.

A risk-averse optimization model for trading wind energy in a market environment under uncertainty

In this paper, a stochastic programming approach is proposed for trading wind energy in a market environment under uncertainty. Uncertainty in the energy market prices is the main cause of high volatility of profits achieved by power producers. The volatile and intermittent nature of wind energy represents another source of uncertainty. Hence, each uncertain parameter is modeled by scenarios, where each scenario represents a plausible realization of the uncertain parameters with an associated occurrence probability. Also, an appropriate risk measurement is considered. The proposed approach is applied on a realistic case study, based on a wind farm in Portugal. Finally, conclusions are duly drawn. (C) 2011 Elsevier Ltd. All rights reserved.

A comparative value of electricity storage within GB market mechanisms

This paper investigates the value of a generic storage system within two GB market mechanisms and one ancillary service provision: the wholesale power market, the Balancing Mechanism and Firm Frequency Response (FFR). Three models are evaluated under perfect foresight and fixed horizon which is subsequently extended to explore the impact of a longer foresight on market revenues. The results show that comparatively, the balancing mechanism represents the highest source of potential revenues followed by the wholesale power market and Firm Frequency Response respectively. Longer horizons show diminishing returns, with the 1 day horizon providing the vast majority of total revenues. However storage power capacity utilization benefits from such long horizons. These results could imply that short horizons are very effective in capturing revenues in both the wholesale market and balancing mechanism whereas sizing of a storage system should take into consideration horizon foresight and accuracy for greater benefit.

Propuestas regulatorias para el diseño de un mercado ibérico a plazo eficiente de la energía = Regulatory proposals for the development of an efficient iberian energy forward market

El mercado ibérico de futuros de energía eléctrica gestionado por OMIP (“Operador do Mercado Ibérico de Energia, Pólo Português”, con sede en Lisboa), también conocido como el mercado ibérico de derivados de energía, comenzó a funcionar el 3 de julio de 2006. Se analiza la eficiencia de este mercado organizado, por lo que se estudia la precisión con la que sus precios de futuros predicen el precio de contado. En dicho mercado coexisten dos modos de negociación: el mercado continuo (modo por defecto) y la contratación mediante subasta. En la negociación en continuo, las órdenes anónimas de compra y de venta interactúan de manera inmediata e individual con órdenes contrarias, dando lugar a operaciones con un número indeterminado de precios para cada contrato. En la negociación a través de subasta, un precio único de equilibrio maximiza el volumen negociado, liquidándose todas las operaciones a ese precio. Adicionalmente, los miembros negociadores de OMIP pueden liquidar operaciones “Over-The-Counter” (OTC) a través de la cámara de compensación de OMIP (OMIClear). Las cinco mayores empresas españolas de distribución de energía eléctrica tenían la obligación de comprar electricidad hasta julio de 2009 en subastas en OMIP, para cubrir parte de sus suministros regulados. De igual manera, el suministrador de último recurso portugués mantuvo tal obligación hasta julio de 2010. Los precios de equilibrio de esas subastas no han resultado óptimos a efectos retributivos de tales suministros regulados dado que dichos precios tienden a situarse ligeramente sesgados al alza. La prima de riesgo ex-post, definida como la diferencia entre los precios a plazo y de contado en el periodo de entrega, se emplea para medir su eficiencia de precio. El mercado de contado, gestionado por OMIE (“Operador de Mercado Ibérico de la Energía”, conocido tradicionalmente como “OMEL”), tiene su sede en Madrid. Durante los dos primeros años del mercado de futuros, la prima de riesgo media tiende a resultar positiva, al igual que en otros mercados europeos de energía eléctrica y gas natural. En ese periodo, la prima de riesgo ex-post tiende a ser negativa en los mercados de petróleo y carbón. Los mercados de energía tienden a mostrar niveles limitados de eficiencia de mercado. La eficiencia de precio del mercado de futuros aumenta con el desarrollo de otros mecanismos coexistentes dentro del mercado ibérico de electricidad (conocido como “MIBEL”) –es decir, el mercado dominante OTC, las subastas de centrales virtuales de generación conocidas en España como Emisiones Primarias de Energía, y las subastas para cubrir parte de los suministros de último recurso conocidas en España como subastas CESUR– y con una mayor integración de los mercados regionales europeos de energía eléctrica. Se construye un modelo de regresión para analizar la evolución de los volúmenes negociados en el mercado continuo durante sus cuatro primeros años como una función de doce indicadores potenciales de liquidez. Los únicos indicadores significativos son los volúmenes negociados en las subastas obligatorias gestionadas por OMIP, los volúmenes negociados en el mercado OTC y los volúmenes OTC compensados por OMIClear. El número de creadores de mercado, la incorporación de agentes financieros y compañías de generación pertenecientes a grupos integrados con suministradores de último recurso, y los volúmenes OTC compensados por OMIClear muestran una fuerte correlación con los volúmenes negociados en el mercado continuo. La liquidez de OMIP está aún lejos de los niveles alcanzados por los mercados europeos más maduros (localizados en los países nórdicos (Nasdaq OMX Commodities) y Alemania (EEX)). El operador de mercado y su cámara de compensación podrían desarrollar acciones eficientes de marketing para atraer nuevos agentes activos en el mercado de contado (p.ej. industrias consumidoras intensivas de energía, suministradores, pequeños productores, compañías energéticas internacionales y empresas de energías renovables) y agentes financieros, captar volúmenes del opaco OTC, y mejorar el funcionamiento de los productos existentes aún no líquidos. Resultaría de gran utilidad para tales acciones un diálogo activo con todos los agentes (participantes en el mercado, operador de mercado de contado, y autoridades supervisoras). Durante sus primeros cinco años y medio, el mercado continuo presenta un crecimento de liquidez estable. Se mide el desempeño de sus funciones de cobertura mediante la ratio de posición neta obtenida al dividir la posición abierta final de un contrato de derivados mensual entre su volumen acumulado en la cámara de compensación. Los futuros carga base muestran la ratio más baja debido a su buena liquidez. Los futuros carga punta muestran una mayor ratio al producirse su menor liquidez a través de contadas subastas fijadas por regulación portuguesa. Las permutas carga base liquidadas en la cámara de compensación ubicada en Madrid –MEFF Power, activa desde el 21 de marzo de 2011– muestran inicialmente valores altos debido a bajos volúmenes registrados, dado que esta cámara se emplea principalmente para vencimientos pequeños (diario y semanal). Dicha ratio puede ser una poderosa herramienta de supervisión para los reguladores energéticos cuando accedan a todas las transacciones de derivados en virtud del Reglamento Europeo sobre Integridad y Transparencia de los Mercados de Energía (“REMIT”), en vigor desde el 28 de diciembre de 2011. La prima de riesgo ex-post tiende a ser positiva en todos los mecanismos (futuros en OMIP, mercado OTC y subastas CESUR) y disminuye debido a la curvas de aprendizaje y al efecto, desde el año 2011, del precio fijo para la retribución de la generación con carbón autóctono. Se realiza una comparativa con los costes a plazo de generación con gas natural (diferencial “clean spark spread”) obtenido como la diferencia entre el precio del futuro eléctrico y el coste a plazo de generación con ciclo combinado internalizando los costes de emisión de CO2. Los futuros eléctricos tienen una elevada correlación con los precios de gas europeos. Los diferenciales de contratos con vencimiento inmediato tienden a ser positivos. Los mayores diferenciales se dan para los contratos mensuales, seguidos de los trimestrales y anuales. Los generadores eléctricos con gas pueden maximizar beneficios con contratos de menor vencimiento. Los informes de monitorización por el operador de mercado que proporcionan transparencia post-operacional, el acceso a datos OTC por el regulador energético, y la valoración del riesgo regulatorio pueden contribuir a ganancias de eficiencia. Estas recomendaciones son también válidas para un potencial mercado ibérico de futuros de gas, una vez que el hub ibérico de gas –actualmente en fase de diseño, con reuniones mensuales de los agentes desde enero de 2013 en el grupo de trabajo liderado por el regulador energético español– esté operativo. El hub ibérico de gas proporcionará transparencia al atraer más agentes y mejorar la competencia, incrementando su eficiencia, dado que en el mercado OTC actual no se revela precio alguno de gas. ABSTRACT The Iberian Power Futures Market, managed by OMIP (“Operador do Mercado Ibérico de Energia, Pólo Português”, located in Lisbon), also known as the Iberian Energy Derivatives Market, started operations on 3 July 2006. The market efficiency, regarding how well the future price predicts the spot price, is analysed for this energy derivatives exchange. There are two trading modes coexisting within OMIP: the continuous market (default mode) and the call auction. In the continuous trading, anonymous buy and sell orders interact immediately and individually with opposite side orders, generating trades with an undetermined number of prices for each contract. In the call auction trading, a single price auction maximizes the traded volume, being all trades settled at the same price (equilibrium price). Additionally, OMIP trading members may settle Over-the-Counter (OTC) trades through OMIP clearing house (OMIClear). The five largest Spanish distribution companies have been obliged to purchase in auctions managed by OMIP until July 2009, in order to partly cover their portfolios of end users’ regulated supplies. Likewise, the Portuguese last resort supplier kept that obligation until July 2010. The auction equilibrium prices are not optimal for remuneration purposes of regulated supplies as such prices seem to be slightly upward biased. The ex-post forward risk premium, defined as the difference between the forward and spot prices in the delivery period, is used to measure its price efficiency. The spot market, managed by OMIE (Market Operator of the Iberian Energy Market, Spanish Pool, known traditionally as “OMEL”), is located in Madrid. During the first two years of the futures market, the average forward risk premium tends to be positive, as it occurs with other European power and natural gas markets. In that period, the ex-post forward risk premium tends to be negative in oil and coal markets. Energy markets tend to show limited levels of market efficiency. The price efficiency of the Iberian Power Futures Market improves with the market development of all the coexistent forward contracting mechanisms within the Iberian Electricity Market (known as “MIBEL”) – namely, the dominant OTC market, the Virtual Power Plant Auctions known in Spain as Energy Primary Emissions, and the auctions catering for part of the last resort supplies known in Spain as CESUR auctions – and with further integration of European Regional Electricity Markets. A regression model tracking the evolution of the traded volumes in the continuous market during its first four years is built as a function of twelve potential liquidity drivers. The only significant drivers are the traded volumes in OMIP compulsory auctions, the traded volumes in the OTC market, and the OTC cleared volumes by OMIClear. The amount of market makers, the enrolment of financial members and generation companies belonging to the integrated group of last resort suppliers, and the OTC cleared volume by OMIClear show strong correlation with the traded volumes in the continuous market. OMIP liquidity is still far from the levels reached by the most mature European markets (located in the Nordic countries (Nasdaq OMX Commodities) and Germany (EEX)). The market operator and its clearing house could develop efficient marketing actions to attract new entrants active in the spot market (e.g. energy intensive industries, suppliers, small producers, international energy companies and renewable generation companies) and financial agents as well as volumes from the opaque OTC market, and to improve the performance of existing illiquid products. An active dialogue with all the stakeholders (market participants, spot market operator, and supervisory authorities) will help to implement such actions. During its firs five and a half years, the continuous market shows steady liquidity growth. The hedging performance is measured through a net position ratio obtained from the final open interest of a month derivatives contract divided by its accumulated cleared volume. The base load futures in the Iberian energy derivatives exchange show the lowest ratios due to good liquidity. The peak futures show bigger ratios as their reduced liquidity is produced by auctions fixed by Portuguese regulation. The base load swaps settled in the clearing house located in Spain – MEFF Power, operating since 21 March 2011, with a new denomination (BME Clearing) since 9 September 2013 – show initially large values due to low registered volumes, as this clearing house is mainly used for short maturity (daily and weekly swaps). The net position ratio can be a powerful oversight tool for energy regulators when accessing to all the derivatives transactions as envisaged by European regulation on Energy Market Integrity and Transparency (“REMIT”), in force since 28 December 2011. The ex-post forward risk premium tends to be positive in all existing mechanisms (OMIP futures, OTC market and CESUR auctions) and diminishes due to the learning curve and the effect – since year 2011 – of the fixed price retributing the indigenous coal fired generation. Comparison with the forward generation costs from natural gas (“clean spark spread”) – obtained as the difference between the power futures price and the forward generation cost with a gas fired combined cycle plant taking into account the CO2 emission rates – is also performed. The power futures are strongly correlated with European gas prices. The clean spark spreads built with prompt contracts tend to be positive. The biggest clean spark spreads are for the month contract, followed by the quarter contract and then by the year contract. Therefore, gas fired generation companies can maximize profits trading with contracts of shorter maturity. Market monitoring reports by the market operator providing post-trade transparency, OTC data access by the energy regulator, and assessment of the regulatory risk can contribute to efficiency gains. The same recommendations are also valid for a potential Iberian gas futures market, once an Iberian gas hub – currently in a design phase, with monthly meetings amongst the stakeholders in a Working Group led by the Spanish energy regulatory authority since January 2013 – is operating. The Iberian gas hub would bring transparency attracting more shippers and improving competition and thus its efficiency, as no gas price is currently disclosed in the existing OTC market.

Ensuring Energy Security in Europe: The EU between a Market-based and a Geopolitical Approach. EU Diplomacy Paper 03/2013

The question of energy security of the European Union (EU) has come high on the European political agenda since the mid-2000s as developments in the international energy sector have increasingly been perceived as a threat by the EU institutions and by the Member State governments. The externalisation of the EU’s internal energy market has in that context been presented as a means to ensure energy security. This approach, which can be called ‘post-modern’ with reference to Robert Cooper’s division of the world into different ‘ages’,1 however, shows insufficiencies in terms of energy security as a number of EU energy partners belonging to the ‘modern’ world do not accept to play the same rules. This consequently poses the questions of the relevance of the market-based approach and of the need for alternative solutions. This paper therefore argues that the market-based approach, based on the liberalisation of the European energy market, needs to be complemented by a geopolitical approach to ensure the security of the EU’s energy supplies. Such a geopolitical approach, however, still faces important challenges.

Too high and too low: The problems with energy prices in the EU. OSW Commentary No. 122, 03.12.2013

On 11 October, the top executives of ten European energy companies, which jointly own about half of the European Union’s electricity generating capacity, warned that “energy security is no longer guaranteed” and once again called for changes to EU energy policy. Due to persistent adverse conditions in the energy market (linked to, for example, the exceptionally low wholesale energy prices) more and more conventional power plants are being closed down. According to sector representatives, this could lead to energy shortages being seen as early as this winter. Meanwhile, in an interview with The Daily Telegraph published in September of this year, the European industry commissioner Antonio Tajani warned – in a rather alarmist tone – of the disastrous consequences the rising energy prices could have on European industry. Amongst the reasons for the high prices of energy, Tajani mentioned the overambitious pace and methods used to increase the share of renewables in the sector. In a similar vein, EU President Herman Van Rompuy has highlighted the need to reduce energy costs as a top priority for EU energy policy1. The price of energy has become one of the central issues in the current EU energy debate. The high consumer price of energy – which has been rising steadily over the past several years – poses a serious challenge to both household and industrial users. Meanwhile, the declining wholesale prices are affecting the cost-effectiveness of energy production and the profits of energy companies. The current difficulties, however, are first and foremost a symptom of much wider problems related to the functioning of both the EU energy market as well as to the EU’s climate and energy policies.

Energy polarization and popular representation: Evidence from the Russian Duma

In this article we introduce the term “energy polarization” to explain the politics of energy market reform in the Russian Duma. Our model tests the impact of regional energy production, party cohesion and ideology, and electoral mandate on the energy policy decisions of the Duma deputies (oil, gas, and electricity bills and resolution proposals) between 1994 and 2003. We find a strong divide between Single-Member District (SMD) and Proportional Representation (PR) deputies High statistical significance of gas production is demonstrated throughout the three Duma terms and shows Gazprom's key position in the post-Soviet Russian economy. Oil production is variably significant in the two first Dumas, when the main legislative debates on oil privatization occur. There is no constant left–right continuum, which is consistent with the deputies' proclaimed party ideology. The pro- and anti-reform poles observed in our Poole-based single dimensional scale are not necessarily connected with liberal and state-oriented regulatory policies, respectively. Party switching is a solid indicator of Russia's polarized legislative dynamics when it comes to energy sector reform.

Optimum demand side response of smart grid with renewable energy source and electrical vehicles

The paper presents a demand side response scheme,which assists electricity consumers to proactively control own demands in such a way to deliberately avert congestion periods on the electrical network. The scheme allows shifting loads from peak to low demand periods in an attempt to flattening the national electricity requirement. The scheme can be concurrently used to accommodate the utilization of renewable energy sources,that might be available at user’s premises. In addition the scheme allows a full-capacity utilization of the available electrical infrastructure by organizing a wide-use of electric vehicles. The scheme is applicable in the Eastern and Southern States of Australia managed by the Australian Energy Market Operator. The results indicate the potential of the scheme to achieve energy savings and release capacity to accommodate renewable energy and electrical vehicle technologies.

Modeling electricity price events as point processes

Energy prices are highly volatile and often feature unexpected spikes. It is the aim of this paper to examine whether the occurrence of these extreme price events displays any regularities that can be captured using an econometric model. Here we treat these price events as point processes and apply Hawkes and Poisson autoregressive models to model the dynamics in the intensity of this process.We use load and meteorological information to model the time variation in the intensity of the process. The models are applied to data from the Australian wholesale electricity market, and a forecasting exercise illustrates both the usefulness of these models and their limitations when attempting to forecast the occurrence of extreme price events.

Defining expected cost for the air conditioning to avoid a price spike of electricity market under DSR model

This work presents a demand side response model (DSR) which assists small electricity consumers, through an aggregator, exposed to the market price to proactively mitigate price and peak impact on the electrical system. The proposed model allows consumers to manage air-conditioning when as a function of possible price spikes. The main contribution of this research is to demonstrate how consumers can minimise the total expected cost by optimising air-conditioning to account for occurrences of a price spike in the electricity market. This model investigates how pre-cooling method can be used to minimise energy costs when there is a substantial risk of an electricity price spike. The model was tested with Queensland electricity market data from the Australian Energy Market Operator and Brisbane temperature data from the Bureau of Statistics during hot days on weekdays in the period 2011 to 2012.